MicroStrategy CEO Michael Saylor: ‘Pretty Obvious’ Ethereum ($ETH) Is a Security

Michael J. Saylor, Co-Founder, Chairman, and CEO of Nasdaq-listed business intelligence company MicroStrategy Inc. (NASDAQ: MSTR), says that it’s “pretty obvious” that Ethereum ($ETH) is a security. 

According to a report by The Daily Hodl, Saylor, a well-known Bitcoin maximalist, made his comments on July 7 during an interview with crypto market commentary show “Altcoin Daily”. Saylor was asked by the show’s host to give his take on Bitcoin and Ethereum being regarded as commodities by certain U.S. legislators as well as a few officials from the Securities and Exchange Commission (SEC) and Commodities and the Commodities Futures Trading Commission (CFTC). 

Here are the reasons that Saylor gave for believing that Ethereum is a security:

 think it’s pretty obvious it’s a security. It was issued via an ICO [initial coin launch]. There’s a management team. There was a pre-mine. There’s a hard fork. There are continual hard forks. There’s a difficulty bomb that keeps getting pushed back...

For it to be a commodity, there can’t be an issuer and the truth is you can’t really make decisions. One of the fundamental insights in the crypto industry is the fact that you can change it is what makes it a security...

If you look at most of these cryptos, where they have hard fork after hard fork after hard fork, the problem with a hard fork is changing the protocol means that some development team is making a decision, and if you can change the protocol in a material way, you can change the monetary protocol. A hard fork can change the issuance pattern, or it can change the value of something. So that makes an investment contract under securities law.


On 14 June 2018, William Hinman, then director of the Division of Corporation Finance at the SEC, made a speech at Yahoo Finance’s “All Markets Summit: Crypto” one-day event in San Francisco, California. The speech was about how the SEC plans to use the “Howey Test” to determine whether a digital asset should be considered a security or not. The only two cryptocurrencies Hinman mentioned by name were Bitcoin (BTC) and Ether (ETH), neither of which he said should be considered as securities:

And so, when I look at Bitcoin today, I do not see a central third party whose efforts are a key determining factor in the enterprise. The network on which Bitcoin functions is operational and appears to have been decentralized for some time, perhaps from inception. Applying the disclosure regime of the federal securities laws to the offer and resale of Bitcoin would seem to add little value.[9]

And putting aside the fundraising that accompanied the creation of Ether, based on my understanding of the present state of Ether, the Ethereum network and its decentralized structure, current offers and sales of Ether are not securities transactions. And, as with Bitcoin, applying the disclosure regime of the federal securities laws to current transactions in Ether would seem to add little value.

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